US firms awake to ‘sad day’ in Hong Kong as Trump cuts ties

US President Donald Trump accused Beijing of breaking its word over Hong Kong’s autonomy, and described China’s national security legislation as a ‘tragedy for the world.’ (Shutterstock)
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Updated 31 May 2020

US firms awake to ‘sad day’ in Hong Kong as Trump cuts ties

  • President moves to strip finance hub of economic privileges in wake of tough new Chinese security laws

HONG KONG: The American Chamber of Commerce in Hong Kong said on Saturday it was a sad day for the global financial center, hours after US President Donald Trump moved toward stripping the city of its special treatment in a bid to punish China.

In some of his toughest rhetoric yet, Trump said Beijing had broken its word over Hong Kong’s high degree of autonomy by proposing new national security legislation and the territory no longer warranted US economic privileges.

“We will take action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China,” Trump said, adding that Washington would also impose sanctions on individuals seen as responsible for “smothering — absolutely smothering — Hong Kong’s freedom.”

Speaking at the White House, Trump said China’s move on Hong Kong was a tragedy for the world.

But Trump gave no timetable for the moves, leaving Hong Kong residents, businesses and officials to ponder just how far his administration will go. “This is an emotional moment for Americans in Hong Kong and it will take companies and families a while to digest the ramifications,” AmCham President Tara Joseph said in a statement.

“Many of us have deep ties to this city and with Hong Kong people. We love Hong Kong and it’s a sad day,” she said, adding the chamber would continue to work with its members to maintain Hong Kong’s status as a vital business center.

China’s parliament this week approved a decision to create laws for Hong Kong to curb sedition, secession, terrorism and foreign interference. Mainland security and intelligence agents may be stationed in the city for the first time — moves critics say puts the city’s extensive freedoms at risk.

Trump did not name any sanctions targets but said the announcement would “affect the full range of agreements we have with Hong Kong,” including the US-Hong Kong extradition treaty to export controls on dual-use technologies and more “with few exceptions.”

China’s Global Times, which is published by the People’s Daily, the official newspaper of China’s ruling Communist Party, said Trump’s decision was a “recklessly arbitrary” step.

The Hong Kong government, which has a long history of working ties with US counterparts distinct from Beijing, has yet to respond, although it warned on Thursday the move could be a double edged sword.

More than 1,300 US firms have offices in Hong Kong and provide about 100,000 jobs. In the past decade, the US trade surplus with Hong Kong has been the biggest among all its trading partners, totaling $297 billion from 2009 to 2018.

Britain, meanwhile, is prepared to offer extended visa rights and a pathway to citizenship for almost 3 million Hong Kong residents in response to China’s push to impose national security legislation in the former British colony.


NYSE begins move to delist Chinese state oil producer CNOOC

Updated 27 February 2021

NYSE begins move to delist Chinese state oil producer CNOOC

  • The Trump administration had last year moved against certain Chinese companies that Washington said were owned or controlled by the Chinese military in an effort to ramp up pressure on Beijing

The New York Stock Exchange on Friday decided to begin formal delisting of Chinese state oil giant CNOOC Ltd. based on an update to an executive order signed by former US President Donald Trump in November last year.
Prohibitions on CNOOC will take effect on March 9, 60 days after the company was added to the list that prohibits US investments, according to a guidance issued by the Treasury Department on Jan. 27.
However, the exchange did not disclose a target date for the completion of the delisting.
The Trump administration had last year moved against certain Chinese companies that Washington said were owned or controlled by the Chinese military in an effort to ramp up pressure on Beijing.
The NYSE said CNOOC has the right to appeal the delisting decision. The exchange will include any appeal it receives in its application to the US Securities and Exchange Commission, which will be submitted on completion of all procedures.
CNOOC could not be immediately reached for comment.


McDonald’s considers selling part of digital startup Dynamic Yield

Updated 27 February 2021

McDonald’s considers selling part of digital startup Dynamic Yield

  • Dynamic Yield is run as a standalone company within McDonald’s
  • The startup, whose customers include IKEA and Lacoste, has businesses with more than 300 brands globally

McDonald’s Corp. is exploring selling part of Israeli artificial intelligence startup Dynamic Yield Ltd, which it acquired two years ago in an attempt to boost online marketing efforts, the company said on Friday.
Dynamic Yield, run as a standalone company within McDonald’s, personalizes customers’ experience by changing offerings on the chain’s Drive Thru menu displays, according to time of day, weather, customer traffic and trending choices.
The startup, whose customers include IKEA and Lacoste, has businesses with more than 300 brands globally.
“The potential sale of the non-McDonald’s part of our business has been discussed from the outset and now feels like the right time to explore that possibility,” its chief executive, Liad Agmon, said in a statement.
The Chicago-based hamburger chain said it was considering a sale of only the part of Dynamic Yield that works with other companies with no timeline set for the deal.
McDonald’s said Dynamic Yield’s technology was used across many markets, adding, “We’re continuing to deploy to more.”


SoftBank says deal reached with WeWork founder, directors

Updated 27 February 2021

SoftBank says deal reached with WeWork founder, directors

  • Tokyo-based SoftBank is a majority shareholder in WeWork, whose bumpy results, especially amid the coronavirus pandemic, has dented SoftBank’s financial results
  • SoftBank says WeWork holds potential, especially in markets like Japan

TOKYO: SoftBank Group Corp. has reached a settlement in a US legal dispute with directors of office space-sharing venture WeWork Inc. and its founder Adam Neumann, the Japanese technology company said Saturday.
The terms of the settlement in the Delaware Court of Chancery were not disclosed. The statement said the agreement was not yet final. Other details were not immediately available.
The wrangling began more than a year ago after SoftBank acquired shares in WeWork, which was suffering after its failed IPO. But some investors and Neumann were not satisfied with the monetary deals offered by SoftBank.
“With this litigation behind us, we are fully focused on our mission to reimagine the workplace and continue to meet the growing demand for flexible space around the world,” said Marcelo Claure, executive chairman of WeWork and SoftBank Group International chief executive.
Tokyo-based SoftBank is a majority shareholder in WeWork, whose bumpy results, especially amid the coronavirus pandemic, has dented SoftBank’s financial results.
SoftBank says WeWork holds potential, especially in markets like Japan, where office space is costly and workers’ commutes tend to be long. SoftBank also invests in artificial intelligence, Internet services, sustainable energy and IoT.


Investors weigh new stock leadership as broader market wobbles

Updated 27 February 2021

Investors weigh new stock leadership as broader market wobbles

  • Tech and momentum stocks helped drive returns in 2020 “when everyone was locked down and all they had was their computer”

NEW YORK: A shakeup in stocks accelerated by the past week’s surge in Treasury yields has investors weighing how far a recent leadership rotation in the US equity market can run, and its implications for the broader S&P 500 index.
Moves this week further spurred a shift that has seen months-long outperformance for energy, financial and other shares expected to benefit from an economic recovery, while a climb in Treasury yields weighed on the technology stocks that have led markets higher for years.
The two-track market left the benchmark S&P 500 down for the week, and sparked questions about whether it could sustain gains going forward if the tech and growth stocks that account for the biggest weights in the index struggle.
So far this year, the S&P 500, which gives more influence to stocks with larger market values, is up 1.5 percent, while a version of the index that weights stocks equally is up 5 percent.
“That just tells us the gains are less narrow, more companies are participating, and I think that’s healthy,” said James Ragan, director of wealth management research at D.A. Davidson.
The focus on market leadership comes as investors are weighing whether the S&P 500 is due for a significant pullback after a 70 percent run since March, with the rise in long-dormant yields the latest sign of trouble for equities as it means bonds are more serious investment competition. The yield on the 10-year US Treasury note this week jumped to a one-year peak of 1.6 percent before pulling back.
Economic improvement will be in focus in the coming weeks, including the monthly US jobs report due next Friday, as will the country’s ability to ensure widespread coronavirus vaccinations, especially as new variants emerge.
Tech and momentum stocks helped drive returns in 2020 “when everyone was locked down and all they had was their computer,” said Jack Ablin, chief investment officer at Cresset Capital Management. “Now it seems with the vaccines, the stimulus and the prospect of reopening that we are looking out toward a recovery phase.”
The shift in the market this week is building on one that was fueled in early November, when Pfizer’s breakthrough COVID-19 vaccine news generated broad bets on an economic rebound in 2021.
Among the moves since that point: the S&P 500 financial and energy sectors are up 29 percent and 65 percent, respectively, against a nearly 9% rise for the benchmark index and 7 percent rise for the tech sector. The Russell 1000 value index has gained 16.5 percent against a 4.3 percent climb for its growth counterpart, while the smallcap Russell 2000 is up 34 percent.
“You definitely are seeing the reopening trade that has pretty much come alive here,” said Gary Bradshaw, portfolio manager of Hodges Capital Management.
Despite the gains, there remains “plenty of room for the reflation trade to run from a valuation perspective,” Lori Calvasina, head of US equity strategy at RBC Capital Markets, said in a report this week. RBC is “overweight” the financials, materials and energy sectors.
Rising rates tend to be favorable for more cyclical sectors, David Lefkowitz, head of Americas equities at UBS Global Wealth Management, said in a note, with financials, energy, industrials and materials showing the strongest positive correlations among sectors with 10-year Treasury yields.
Still, how long the market’s reopening trade lasts remains to be seen. Investors may be reluctant to stray from tech and growth stocks, especially with many of the companies expected to put up strong profits for years.
Any setbacks with the economy or with efforts to quell the coronavirus could revive the stay-at-home stocks that thrived for most of 2020.
And with a GameStop-fueled retail-trading frenzy taking hold this year, banks and other stocks in the reopening trade may fail to draw the same attention from amateur investors as stocks such as Tesla, said Rick Meckler, partner at Cherry Lane Investments.
“There isn’t the pizzazz to those stocks,” Meckler said. “There rarely is a potential for stocks to make the kind of moves that big tech growth stocks have made.”


IMF urges Tunisia to cut wage bill and energy subsidies

Updated 27 February 2021

IMF urges Tunisia to cut wage bill and energy subsidies

  • The IMF said in statement that monetary policy should focus on inflation by steering short term interest rates, while preserving exchange rate flexibility

TUNIS: The International Monetary Fund urged Tunisia on Friday to cut its wage bill and limit energy subsidies to reduce a fiscal deficit, putting more pressure on the fragile government amid a severe financial and political crisis.
With the coronavirus pandemic, political infighting and protests since last month over social inequality, it is a time of unprecedented economic hardship in the North Africa country that ran a fiscal deficit of 11.5 percent of GDP in 2020.
The IMF said in statement that monetary policy should focus on inflation by steering short term interest rates, while preserving exchange rate flexibility.
Tunisia’s 2021 budget forecasts borrowing needs $7.2 billion including about $5 billion in foreign loans. It puts debt repayments due this year at 16 billion dinars, up from 11 billion dinars in 2020.
The IMF said the service salary bill is about 17.6% of GDP, among the highest in the world.